Welcome to the freelance economy! Why getting on the payroll might not be in the cards for millennials.
By Isaac Oates
Dear Recent College Graduates,
Congratulations! It’s sure been a great four years, and I’m sure you’ve learned a lot. Now that you’ve put away the cap and the gown and the pomp and the circumstance, let me teach you one more rather painful lesson: there’s no gold Rolex in your future, no long career with the same company until retirement like your parents and grandparents had.
This probably isn’t news for you. If you’ve been following the news even a little bit, you know that your first paying gig might not even be on payroll, but as a freelancer. That’s because the American economy is changing, and changing fast. In 2013 nearly one in three Americans in the work force was working as a freelancer. That’s 42 million people. By 2020 it is estimated that 50 percent of the full-time workforce may be working as independent contractors. So, dear graduates, get used to it. Welcome to the freelance economy.
The Freelance Economy
The freelance economy is not as scary as it may sound. Working for yourself can be great, but it brings with it its own set of challenges. From handling the payroll tax, to filing quarterly, to properly tracking business expenses, to handling health insurance, learning what you have to do to freelance smart can feel like a job in and of itself. It doesn’t have to be. Here are three quick tips to help you make smarter decisions in our new freelance economy.
1) Get health care coverage: I know what you’re thinking: I’m young, I’m healthy, and there’s no point in spending money on something I’m not even going to use. If only: health care is a must, because even the youngest and healthiest among us may, God forbid, come down with something serious that requires serious care. You can research a health care provider that’s right for you online, and make your own choices about what kind of coverage you need. Just keep track of open enrollment dates, and do your best to keep the doctor away.
2) Keep your house in order: To paraphrase the great Jay-Z, you’re not a businessman, you’re a business, man! This means you’re going to have to start thinking like one. An independent contractor, which is what you are, is basically a small business, and the best practice in your case is to create an LLC and a business bank account for your own business. This protects you and your personal assets from crazy claims that might arise, and keeps everything organized. Then, you have to learn to keep your business expenses and your personal expenses separate. Sure, you can write off certain expenses as business expenses, but you really ought to get disciplined and distinguish between that personal meal with friends at Arby’s and that business lunch you just had with a client. The best advice is to use some software like QuickBooks to help you organized your business and track its performance; that way, you’ll maximize the amount you can save come tax season.
3) File quarterly: It’s a mindset thing. Don’t wait until April. You’re not an employee anymore: you’re your own boss, your own business, and filing quarterly is the most cautious and beneficial way to go about it, helping you avoid fees as well as keep a tight ship.
All this on the freelance economy may sound daunting; it’s really not. Once you get into the groove of the freelance economy, you’ll find out the great promise of your situation: you may not have the retirement party 40 years down the line, but you’re an entrepreneur, a company of one, and, most importantly, your own boss. I promise you that despite the initial hardships and insecurities, it’s a privilege you’ll come to enjoy.
About the Author
Isaac Oates is the CEO of Justworks, providers of fully-outsourced payroll, compliance, and benefits services. For more info on the author and the freelance economy concepts, visit: